WHAT IS THE CRIMINAL FINANCES BILL AND HOW WILL IT AFFECT FINANCIAL SERVICES FIRMS?

In October 2016, the UK government introduced the Criminal Finances Bill in a bid to tackle the growing concern around money laundering, terrorist financing and corruption. It is estimated that serious and organised crime costs the UK economy at least £24bn a year, and that the amount of money laundered in the UK annually is between £36bn and £90bn. The Bill follows the UK National Risk Assessment, which noted that the UK needed a more robust law enforcement response, a reform to the supervisory regime and an increase in the UK’s international reach. The Bill can be categorised into three key areas, as outlined below.

New offence of failure to prevent the facilitation of tax evasion

Following the UK Bribery Act, and specifically Section 7 where a company is liable for the failure to prevent bribery, the Bill extends UK legislation to include the failure to prevent tax evasion. Like the Bribery Act this offence has extraterritorial scope. A firm will have a defence to the offence if it can show that reasonable procedures were in place to prevent the facilitation of tax evasion. Tax evasion became a hot topic in 2016 following the publication of the Panama Papers, which focused on opaque offshore companies. Following the publication, the FCA reached out to firms to understand their connections to those named in the Panama Papers.